The Waterloo Group of Grantly and its investee companies Clo and Donte at 31 May 2020 are shown below: I 1 Additional information . During the year Grantly acquired a new asset with a fair value of R100,000 under a finance lease. a The lease agreement states payments of R20,000 must be paid for six years on 31 May each year, starting on 31 May 2020. At the end of the six year period legal title of the asset will pass td Grantly. Grantly believes the only accounting entry he must make in relation to this asset is for the R20,000 payment he has made and he has treated this as an operating expense. Draft Income Statements for the year ended 31 May 2020 Grantly Clo Donte R000 R000 R0001 Revenu 1,138 488 1491 Cost of sales -576 -214 -59) Gross 1 profit 562 274 901 Other operating -138 -54 -40! Profit from operations 424 220 50 Interest payable -38 -44 -14 Profit before tax 386 176 361 Taxatior -54 -24 Profit for the yea 332 152 301 11 Grantly acquired 600,000 ordinary shares in Clo on 1 June 2016 forlR1,550,000 when the reserves of Clo were R200,000. . At the date of acquisition of Clo, the fair value of its property was R375,000 higher than its book value and considered to have a remaining Ife of 10 years. -61 1 I T Grantly acquired 150,000 ordinary shares in Donte on 1 June 2019 for R400,000 when the reserves of Donte were R90,000. The fair values of assets of Donte were the same as their net bookivalue at that date. Depreciation should be treated as an operating expensd. Grantly manufactures a component used by Clo and Donte. Grantly sells this component at a margin of 25% and sold goods to Clo for R52,000 buring the year. None of these goods had been sold by Clo at 31 May 2020. Grantly sold goods to Donte for R80,000 and Donte had sold all of these goods at 31 May 2020. The receivables of Grantly include R60,000 in respect of amounts pwing by Clo and R35,000 in respect of amounts owing by Donte. The corresponding balances in the payables of Clo and Donte ard R40,000 (Clo) and R35,000 (Donte). On 30 May 2020 Cio had sent a cheque to Grantly for R20,000. The impairment test on goodwill applied to Clo showed goodwi I is being impaired by 10% per annum on a straight line basis. There has been no impairment for Donte. Requirements: Page 4 Draft Statements of financial position as at 31 May 2020 Grantly Clo Donte ROOO R000 Non-current assets 2,640 812 PPE 690 812 Investments 1,950 Current assets 2,075 799 Inventories 700 594 Receivables 1,000 180 Cash and cash equivalents 375 25 TOTAL ASSETS 4,715 1,611 R000 712 712 Page Page 2 Page 3 1 201 56 130 15 913 1 1 1 I (a) Prepare the calculations for the adjustments required to be made in the accounts of (i).Grantly for the year ended 31 May 2020, to account for the finance lease in note (i). You should apply the sum of the digits method when calculating the finance cost and prepare all workings to the nearest thousand. You should assume these calculations will have no effect on taxation. (5 Marks) 1 1 1 1 1 (b) Prepare the consolidated statement of comprehensive income and consolidated financial position of the Waterloo group at 31 May 2020, incorporating the calculations you have made in requirement (a) above. (20 Marks) 1 3000 1875 1125 300 300 1 1 1290 600 690 200 200 660 500 160 50 1 1 1 Equity Share capital (R1 ordinary shares Reserves Non-current liabilities 7% Loan note Current liabilities Trade Payables Taxation TOTAL LIABITIES & EQUITY 121 1415 1350 65 4715 1 50 203 188 15 913 101 20 1611 1 1 1 Activate Windows The Waterloo Group of Grantly and its investee companies Clo and Donte at 31 May 2020 are shown below: I 1 Additional information . During the year Grantly acquired a new asset with a fair value of R100,000 under a finance lease. a The lease agreement states payments of R20,000 must be paid for six years on 31 May each year, starting on 31 May 2020. At the end of the six year period legal title of the asset will pass td Grantly. Grantly believes the only accounting entry he must make in relation to this asset is for the R20,000 payment he has made and he has treated this as an operating expense. Draft Income Statements for the year ended 31 May 2020 Grantly Clo Donte R000 R000 R0001 Revenu 1,138 488 1491 Cost of sales -576 -214 -59) Gross 1 profit 562 274 901 Other operating -138 -54 -40! Profit from operations 424 220 50 Interest payable -38 -44 -14 Profit before tax 386 176 361 Taxatior -54 -24 Profit for the yea 332 152 301 11 Grantly acquired 600,000 ordinary shares in Clo on 1 June 2016 forlR1,550,000 when the reserves of Clo were R200,000. . At the date of acquisition of Clo, the fair value of its property was R375,000 higher than its book value and considered to have a remaining Ife of 10 years. -61 1 I T Grantly acquired 150,000 ordinary shares in Donte on 1 June 2019 for R400,000 when the reserves of Donte were R90,000. The fair values of assets of Donte were the same as their net bookivalue at that date. Depreciation should be treated as an operating expensd. Grantly manufactures a component used by Clo and Donte. Grantly sells this component at a margin of 25% and sold goods to Clo for R52,000 buring the year. None of these goods had been sold by Clo at 31 May 2020. Grantly sold goods to Donte for R80,000 and Donte had sold all of these goods at 31 May 2020. The receivables of Grantly include R60,000 in respect of amounts pwing by Clo and R35,000 in respect of amounts owing by Donte. The corresponding balances in the payables of Clo and Donte ard R40,000 (Clo) and R35,000 (Donte). On 30 May 2020 Cio had sent a cheque to Grantly for R20,000. The impairment test on goodwill applied to Clo showed goodwi I is being impaired by 10% per annum on a straight line basis. There has been no impairment for Donte. Requirements: Page 4 Draft Statements of financial position as at 31 May 2020 Grantly Clo Donte ROOO R000 Non-current assets 2,640 812 PPE 690 812 Investments 1,950 Current assets 2,075 799 Inventories 700 594 Receivables 1,000 180 Cash and cash equivalents 375 25 TOTAL ASSETS 4,715 1,611 R000 712 712 Page Page 2 Page 3 1 201 56 130 15 913 1 1 1 I (a) Prepare the calculations for the adjustments required to be made in the accounts of (i).Grantly for the year ended 31 May 2020, to account for the finance lease in note (i). You should apply the sum of the digits method when calculating the finance cost and prepare all workings to the nearest thousand. You should assume these calculations will have no effect on taxation. (5 Marks) 1 1 1 1 1 (b) Prepare the consolidated statement of comprehensive income and consolidated financial position of the Waterloo group at 31 May 2020, incorporating the calculations you have made in requirement (a) above. (20 Marks) 1 3000 1875 1125 300 300 1 1 1290 600 690 200 200 660 500 160 50 1 1 1 Equity Share capital (R1 ordinary shares Reserves Non-current liabilities 7% Loan note Current liabilities Trade Payables Taxation TOTAL LIABITIES & EQUITY 121 1415 1350 65 4715 1 50 203 188 15 913 101 20 1611 1 1 1 Activate Windows